What drives crude oil prices?

  • Crude oil prices react to a variety of geopolitical and economic events
  • World oil prices move together due to arbitrage
  • Crude oil prices are the primary driver of petroleum product prices
  • Economic growth has a strong impact on oil consumption
  • Changes in expectations of economic growth can affect oil prices
  • In OECD countries, price increases have coincided with lower consumption
  • Changes in non-OPEC production can affect oil prices
  • Non-OPEC supply expectations indicate changes in market sentiment concerning oil supply
  • Changes in Saudi Arabia crude oil production can affect oil prices
  • Unplanned supply disruptions tighten world oil markets and push prices higher
  • Inventory builds go hand-in-hand with increases in future oil prices relative to current prices (and vice versa)

 

Crude oil prices react to a variety of geopolitical and economic events 

 

World oil prices move together due to arbitrage

 

Crude oil prices are the primary driver of petroleum product prices 

 

Economic growth has a strong impact on oil consumption

 

Changes in expectations of economic growth can affect oil prices

 

In OECD countries, price increases have coincided with lower consumption

 

Changes in non-OPEC production can affect oil prices 

 

Non-OPEC supply expectations indicate changes in market sentiment concerning oil supply 

 

Changes in Saudi Arabia crude oil production can affect oil prices

 

Unplanned supply disruptions tighten world oil markets and push prices higher

 

Inventory builds go hand-in-hand with increases in future oil prices relative to current prices (and vice versa) 

 

Other points to note

Open interest in crude oil futures grew over the last decade as more participants entered the market 

 

Money managers tend to be net long in the U.S. oil futures market 

 

Crude oil plays a major role in commodity investment 

 

Correlations (+ or -) between daily price changes of crude oil futures and other commodities generally rose in recent years